Location Theory sample

The objective of this program is to enable students to become familiar with the major theories of industrial location.

As the exercises are designed to complement rather than replace the textbook, the accompanying text has been kept to a minimum.

In places standard textbook diagrams have been adapted so that exercises involving simple calculations can be completed.

At the highest level the field of location theory is a vast and complex one. However, syllabuses at Advanced level aim only to introduce students to the main elements of theoretical development. It is possible to place location theories into four broad groups.

Those theories which;

  • Emphasise cost factors (Weber).

  • Are concerned with locational interdependence (Hotelling).

  • Emphasise demand (Losch).

  • Emphasise profit and human behaviour (Smith, Pred)
However for some industries the reverse is true and the weight of the finished product is greater than the combined weight of the raw materials transported to the factory.

These are 'weight-gaining' industries. Brewing and soft drinks are good examples.

Weber designed a simple "Material Index" formula to show the relationship between the two transport costs.

Material index = weight of raw materials

weight of finished product

Complete the examples in task 5.

 

The 'Space Cost Curve' as the model is generally termed is a cross-section throught an isodapane map. In the simplest version of the model the space revenue curve is held constant. This means that the price of the product is the same everywhere.

Costs are made up of two elements, production costs and transport costs.

Here production costs are taken to be the same everywhere while transport costs increase with distance from a certain point.

The most profitable location is where the greatest gap between revenue and costs occurs. In this example this point is also the least-cost location.

The spatial margins of profitability are where the space-cost curve and the space-revenue intersect. At these points a firm would break even, incurring neither a loss nor a profit.

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